“This is not your father’s SEC – or your mother’s or even your older brother or sister’s.”
Securities and Exchange Commission Chair Mary Jo White is proud of two new technology tools the Commission is rolling out. She spoke about the new tools at the 41st Annual Securities Regulation Institute.
The first is NEAT, the National Exam Analytics Tool. This new tool is designed to analyze trading data, looking for potential insider trading by comparing trades against significant corporate events. That will be fun. But then the SEC needs to find the connection between the suspicious activity and now connection with an obligation to hold material non-public information confidential. That’s the hard part.
NEAT will also be able to find signs of front running, improper allocations, and other misdeeds by investment advisers. Chair White told the tale of running NEAT against an adviser’s 17 million transactions. Sounds scary. Mostly because of the headache it will be trying to match a trade blotter against the format required by NEAT to input the data.
MIDAS, the Market Information Data Analytics System, collects one billion records of trading data, time-stamped to the microsecond, every day. MIDAS is focused on market stability. It should help the SEC monitor and understand mini-flash crashes, reconstruct market events, and to develop a better understanding of long-term trends.
Both of these tools will create a tremendous amount of data. But that’s just the first step. It’s about understanding the data and finding the signal through the noise.